Thanks to the rise of digital payments, PayPal may finally be realizing its true potential more than 20 years after its founding. PayPal stock has steadily risen as the number of markets in and methods of digital payments grow in both the U.S. and abroad.

Despite PayPal's disappointing earnings report, PYPL stock quickly rebounded above its pre-earnings levels. Such a recovery shows that growth, rather than news, will serve as the driver of PayPal stock for the foreseeable future.

PayPal Stock Recovered Quickly From Its Disappointing Earnings

PayPal stock looks poised to break out again. The stock fell in trading following its Jan. 30 earnings report. While PayPal's earnings beat expectations, Wall Street was disappointed by its revenue that merely met estimates, as well as its Q1 guidance.

However, traders quickly got over their disappointment. The stock recovered to its pre-earnings level within a week. Now PayPal stock trades at around $95.50 per share, just shy of its 52-week high.

Fundamentals also indicate that PYPL stock could move higher. The forward price-earnings ratio of PYPL stock stands at 27.2. That seems reasonable, considering that analysts on average expect the company's profit to increase 19.4% this year and 20.8% in 2020.

And PYPL will indeed grow, greatly benefiting PayPal stock in the process. PayPal CEO Dan Schulman predicts that digital payments will become a $100 trillion market. So far, Schulman estimates that they have reached about 1%-2% of that level.

PayPal Stock Versus SQ Stock

PayPal has had to play catch-up with Square (NYSE: SQ ) in some respects. When PayPal was owned by eBay (NASDAQ: EBAY ), Square came in and took the lead on smartphone-based payments.

To this day, Square is ahead of PYPL in features that go beyond payment processing. However, not all sellers need additional systems. Moreover, the massive growth of online payments leaves room for both companies.

PayPal stock also appears better-positioned to benefit investors than SQ. Square's growth rates will exceed 50% per year for the foreseeable future. However, SQ trades at almost 110 times its forward earnings. PayPal's top line is only expected to increase about 18% in 2020 versus 2019. Still, the forward price-earnings ratio of PayPal stock is only 27.4, making it a much better buy, with lower risk, than SQ stock.

Digital Wallets And Foreign Markets Will Drive PayPal's Growth

PYPL will also benefit from other growth engines. Its digital wallet, Venmo. has opened up a new market for it.

Venmo competes with Zelle, a digital-payment network owned by a number of banks, including Bank of America (NYSE: BAC ) and JPMorgan Chase (NYSE: JPM ). However, Zelle tends to focus on larger, less-frequent transactions, while Venmo focuses on a larger number of smaller purchases. Venmo can also be integrated with one's social network, a feature that's particularly appealing to millennials. The number of payments processed by Venmo surged 80% year-over-year.

Additionally, PayPal has also made moves into China, Japan, and India. In India, PayPal has earned a profit since it entered the market in November 2017. It faces competition from the likes of Amazon (NASDAQ: AMZN ), Alibaba (NYSE: BABA ), and Walmart (NYSE: WMT ) in India.

Despite this competition, PYPL feels optimistic that it can become the leading digital- payment processor in India. Worth just $200 million in 2017, India's digital-payments market should be worth $1 billion by 2023. Bolstered by a population of 1.3 billion that's growing increasingly wealthy, the Indian market has tremendous potential for PYPL.

Final Thoughts on PayPal

PayPal's growth catalysts should enable PYPL stock to advance by large amounts for years to come. PYPL has moved little in the last week, and it's barely higher than the $93 per share level it first reached in September.

However, quarterly reports and Wall Street analysis all affirm that the company's growth remains strong. More people continue to make online payments more often, and online payments continue to transform the way the world spends money. The fact that PYPL is helping to lead this trend bodes well for the performance of PayPal stock in the months and years ahead.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You canfollow Will on Twitterat @HealyWriting.